Circ re. Issue of Equity

THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN, INTO OR FROM THE UNITED STATES, JAPAN, CANADA OR AUSTRALIA OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A BREACH OF THE RELEVANT SECURITIES LAWS OF SUCH JURISDICTION.

Oxford Pharmascience Group plc

("Oxford Pharmascience" or "the Company")

Posting of circular in respect of Placing

Oxford Pharmascience, the speciality pharmaceutical company that uses advanced pharmaceutic technologies to reposition medicines, is pleased to announce that it has today posted a circular to shareholders containing further details of the Placing and notice of a General Meeting (the "Circular") announced yesterday.

The Circular in respect of the Placing will contain the following letter from the Chief Executive of the Company:

1. Introduction

Your Board announced yesterday that it has conditionally raised £1.13m (before expenses) through the placing of 113,000,000 New Ordinary Shares at a placing price of 1p per Ordinary Share with certain institutional and other investors. The placing of these 113,000,000 New Ordinary Shares is conditional on the Company obtaining approval from Shareholders to their allotment and subject to such approval from Shareholders. The net proceeds of the Placing will be used by the Group to accelerate the development of the Group's business as described in more detail below.

Currently, the Directors do not have sufficient authority to disapply pre-emption rights in relation to the allotment of Placing Shares. Accordingly, the placing of these shares is conditional upon the Company obtaining approval from Shareholders to empower the Directors to disapply statutory pre-emption rights which would otherwise apply to the allotment of such new Ordinary Shares. The Placing, which has been arranged by Hybridan, is pursuant to the terms of the Placing Agreement, and is also conditional inter alia upon Admission.

2. Background to and reasons for Placing

Earlier in the year, the Company signed an exclusive licensing and distribution agreement with Aché Laboratórios Farmacêuticos S.A., ("Aché"), one of Brazil's largest pharmaceutical companies, for the supply of healthcare products under Aché's women's health brand, called 'Inellare' and providing the Group with access to the higher value pharmaceutical industry in Brazil. Brazil is one of the largest and most dynamic pharmaceuticals markets in the world.. We have now commenced shipments of our first product to Brazil - a Calcium and Vitamin D product based on the Group's solid state suspension technology which allows for superior taste masking and very rapid dissolution of active ingredients. We have begun testing several concepts in Brazil to expand the range following the launch of the initial first product and we will continue to engage in business development activities to further the array of opportunities, having seen considerable interest, and in line with Aché's expansion of its 'Inellare' product range.

Our proprietary NHTech™ taste masking technology is being used to develop a portfolio of taste masked pharmaceutical ingredients to improve the formulation of non tablet forms of a number of off-patent drugs with initial focus on NSAIDs and Statins. As an example of this, we have recently established proof of concept for the taste masking of ibuprofen (a product that we estimate, using third party data, currently has global sales of circa £2.7bn, which has removed the typical burning sensation experienced on the throat). Having already seen considerable industry interest in our ibuprofen technology, we are now proceeding to establish proof of concept for a portfolio of taste masked ingredients and to demonstrate process scale-up.

In August, we announced that we had signed a worldwide exclusive option with the School of Pharmacy (the University of London) for up to 18 months to license and research an advanced colonic drug technology with a specific intention to develop and commercialise a novel application in a major drug category.

3. Use of proceeds

The total funds raised from the Placing (net of expenses) of approximately £1.08m will be used to continue developing our business in Brazil and to progress and initiate commercialisation of our pipeline which is focused on technologies to reposition and add value to off patent NSAIDs and Statins.

4. Details of the Placing

The Placing will raise £1.13m before expenses through the issue of 113,000,000 New Ordinary Shares at a Placing Price of 1p per share. Net proceeds of the Placing are expected to be approximately £1.08m. Completion of the Placing and the issue of the Placing Shares are subject to the passing of the Resolution at the General Meeting.

The Placing is being conducted by way of a non pre-emptive share issue. The Directors believe that this is the most cost effective method to raise funds, avoiding the significant costs of a full public offer. The Placing Shares represent 19.58% of the Enlarged Share Capital.

The Placing Shares will, on Admission, be credited as fully paid and will have the same rights in all respects with the Existing Ordinary Shares, including the right to receive all dividends and other distributions declared. The Placing is conditional, inter alia, upon:

(i) the approval of the Resolution at the General Meeting;

(ii) the Placing Agreement becoming unconditional in all respects and not having been terminated in accordance with its terms; and

(iii) Admission.

The Placing is to be effected on behalf of the Company by Hybridan, under the terms of the Placing Agreement. Completion of the Placing is subject to certain conditions including those listed above. Under the terms of the Placing Agreement, the Company has agreed to pay Hybridan commission on funds raised by them. The Placing Agreement contains certain warranties given by the Company with respect to its business and the Group and certain matters connected with the Placing. In addition, the Company has given indemnities to Hybridan in connection with the Placing and their performance of services in relation to the Placing. The Placing Agreement may be terminated by Hybridan for, inter alia, a material breach by the Company of the terms of the Placing Agreement or the warranties contained in it or on the occurrence of certain specified events or of certain force majeure events.

Application will be made to the London Stock Exchange for the Placing Shares to be admitted to trading on AIM and it is expected that Admission will be effective and trading will commence at 8:00 am on 23rd November 2011.

Following Admission, the Company will have 577,023,798 Ordinary Shares in issue. Since the Company currently holds no shares in treasury, the total number of voting rights in the Company is therefore 577,023,798 and this figure may therefore be used by Shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change in their interest in, the share capital of the Company under the FSA's Disclosure and Transparency Rules.

Participation in the Placing by the Directors and ORA

As part of the Placing, David Norwood (through his broker) is subscribing for 10,000,000 New Ordinary Shares at the Placing Price and Marcelo Bravo (through his broker) is subscribing for 2,500,000 New Ordinary Shares at the Placing Price. As such, under the AIM Rules, David Norwood and Marcelo Bravo are both deemed to be related parties and their participation in the Placing is deemed to be a related party transaction. Accordingly they have not participated in the Board's consideration of the Placing. Their shareholdings pre and post are as follows:

 As part of the placing ORA, an existing holder of 34.89 per cent of the Existing Ordinary Shares, will be subscribing for 30,000,000 New Ordinary Shares in the Placing. Michael Bretherton, a director of the Company, is also a director of ORA. As such, under the AIM Rules, ORA is deemed to be a related party and their participation in the Placing is deemed to be a related party transaction. Accordingly Michael Bretherton has not participated in the Board's consideration of the Placing. Their shareholdings pre and post are as follows: 

Notice of General Meeting

A notice convening the General Meeting to be held at the offices of Fasken Martineau LLP, Third Floor, 17 Hanover Square, London W1S 1HU at 10.00 am on 21st November 2011 is set out at the end of this document. At the General Meeting, a special resolution will be proposed to disapply pre-emption rights in relation to the issue of the New Ordinary Shares. 

Action to be taken

You will find enclosed with this document a Form of Proxy for use at the General Meeting. Whether or not you intend to attend the General Meeting you are requested to complete the Form of Proxy in accordance with the instructions printed on it and to return it to the Company's registrars, Capita Registrars, PXS, Beckenham, BR3 4TU, as soon as possible, and in any event so as to arrive no later than 10.00 am on 19th November 2011. If you hold your Ordinary Shares in CREST you may appoint a proxy using the CREST proxy appointment service by following the instructions in note (8) to the Notice of General Meeting. The completion and return of a Form of Proxy, or the electronic appointment of a proxy will not preclude Shareholders from attending the General Meeting and voting in person should they so wish.

Recommendation

With the exception of David Norwood and Marcelo Bravo who are participating in the Placing and Michael Bretherton, a director of ORA which is participating in the Placing , the Directors consider, having consulted with ZAI Corporate Finance, that the terms of the Placing are fair and reasonable insofar as shareholders of the Company are concerned.

The Directors (other than David Norwood, Marcelo Bravo and Michael Bretherton) believe that the Placing and therefore the Resolution is in the best interests of the Company and Shareholders taken as a whole. The Directors unanimously recommend that you vote in favour of the Resolution, as they intend to do in respect of their own shareholdings.. The Board has obtained undertakings to vote in favour of the Resolution from shareholders (including Directors) in respect of 322,792,269 Ordinary Shares representing approximately 69.6 per cent of the existing issued ordinary share capital of the Company.

The following definitions apply throughout the Circular, unless the context otherwise requires:

 "Admission" the admission of the Placing Shares to trading on AIM becoming effective in accordance with rule 6 of the AIM Rules

"AIM" a market operated by the London Stock Exchange

"AIM Rules" the AIM Rules for Companies and/or the AIM Rules for Nominated Advisers as applicable

"Company" Oxford Pharmascience Group Plc

"Crest" the computerised settlement system to facilitate transfer of the title to an interest in securities in uncertified form operated by Euroclear UK and Ireland Limited

"Directors" or "the Board" the directors of the Company whose names are set out on page 4 of this document

"Enlarged Share Capital" the 577,023,798 Ordinary Shares in issue on Admission, comprising the Existing Ordinary Shares and the New Ordinary Shares

"Existing Ordinary Shares" the 464,023,798 Ordinary Shares in issue as at the date of this document

"Form of Proxy" the form of proxy for use in relation to the General Meeting which accompanies this document

"General Meeting" the general meeting of the Company, the details of which are set out in the Notice of General Meeting, to be held at the offices of Fasken Martineau LLP, Third Floor, 17 Hanover Square, London W1S 1HU at 10:00 am on 21st November 2011 (or at any adjournment thereof) to consider the Resolution

"Group" the Company and its subsidiary undertakings

"London Stock Exchange" London Stock Exchange plc

"New Ordinary Shares" the Placing Shares

"Notice of General Meeting" the notice convening the General Meeting which is set out at the end of this document

"ORA"  ORA (Guernsey) Limited, a company incorporated in Guernsey

under company number 49949, a wholly owned subsidiary of ORA Capital Partners Limited, a company incorporated in Guernsey under company number 49907 and , a company traded on AIM

"Ordinary Shares" ordinary shares of 0.1p each in the capital of the Company

"Placing" the conditional placing by Hybridan on behalf of the Company of the Placing Shares at the Placing Price, in accordance with the Placing Agreement

"Placing Agreement" the conditional agreement dated 1st November 2011 made between the Company, the Directors and Hybridan, further details of which are set out in this Circular

"Placing Price" 1 pence per New Ordinary Share

"Placing Shares" the 113,000,000 new Ordinary Shares to be issued to placees pursuant to the Placing Agreement

 "Resolution" the special resolution to be proposed at the General Meeting as set out in the Notice of General Meeting

"Shareholder" a holder of Ordinary Shares

"uncertificated" a share or security recorded in the Company's register of members as being held in uncertificated form, title to which may be transferred by means of Crest

A copy of the Circular will also be available on the Company's website: www.oxfordpharmascience.com. Terms defined in the Circular have the same meanings when used in this announcement.

For further information:

Oxford Pharmascience Group Plc

Nigel Theobald, Chief Executive +44 1865 854874

Hybridan LLP (Broker)

Tim Goodman/Deepak Reddy +44 20 7947 4350

ZAI Corporate Finance (Nominated Adviser)

John Depasquale +44 20 7060 2220

About Oxford Pharmascience Group Plc

-- Oxford Pharmascience are specialists in the repositioning of medicines via reformulation using advanced pharmaceutic technologies adding value to off patent and soon to be off patent Active Pharmaceutical Ingredients (API's).

 -- Technology portfolio includes superior chewable tablets, liquid suspensions, and solid state suspensions (soft chews) as well as drug delivery technologies to achieve either taste masking or targeted release effects.

-- Oxford Pharmascience works closely with leading academic institutions to further advance its intellectual property portfolio to apply to off patent and soon to be off patent drugs.